The Stretch Provision: Free Agency’s Safety Net

May 5, 2014; Indianapolis, IN, USA; Washington Wizards center Marcin Gortat (4) reacts to a foul being called and is called for a technical foul against the Indiana Pacers in game one of the second round of the 2014 NBA Playoffs at Bankers Life Fieldhouse. Washington defeats Indiana 102-96. Mandatory Credit: Brian Spurlock-USA TODAY Sports

Some eyebrows were raised when Marcin Gortat agree to re-sign with the Washington Wizards for $60 million over 5 seasons. Certainly $12 million per season is a reasonable price for a big man of Gortat’s ability. However, he’s 30, and big men tend to age in dog years. What looks like a decent deal now could look decidedly uglier if Gortat is dragging up and down the court in February 2018 with another season-and-a-half guaranteed.

Thankfully from the Wizards’ perspective, the 2011 CBA gives them a method to soften the blow. Instead of the prior system under which a team could only get out from under an onerous contract for less than the full amount owed was by negotiating a buyout with the player, teams may now unilaterally waive players and “stretch” the salary and cap hit over a number of subsequent years.

While deals signed under the old CBA are still subject to the old style of buyouts, under the new regime, the rules are simple: teams may request waivers on a player at any time. The waived player will still be due all guaranteed portions of their salary as well as any vested player options. The team has two options as to how to structure these payments both in terms of cutting checks and salary cap impact:

Pay the remaining years and money on the contract as written.

Stretch the contract. Under this provision, the remaining total dollar amount is paid in equal portions over a number of years equal to twice the remaining years on the contract plus one.

For example, in the case of Gortat’s new deal, if the Wizards decide that at 34 with one year and $12 million remaining, Marcin doesn’t have it any more, they can stretch that last $12 million into 3 yearly segments of $4 million per year. If they choose to invoke the provision after 3 years, he would be paid $4.8 million per season for five years, and so on. The remaining contract must be fully stretched or not at all; teams cannot choose to defer parts of salary into later years. Teams may elect to stretch payments but not the cap charges, but generally will wish to reduce any cap and likely luxury tax hits. Note that a team may not take the cap hit up front and spread the actual payments over time.

Teams may not utilize the stretch provision in such a way that they would be responsible for total “dead money” from waived players exceeding 15% of that season’s projected salary cap in any future season.

Among current players one commonly rumored to be waived and stretched is Steve Nash (1 year, $9.7 million), though with the Lakers looking unlikely to land a marquee free agent, the desirability of doing so is basically non-existent. As more deals signed after the lockout ended begin to mature, expect to hear a lot more about teams looking to “stretch” the last year or two of contracts that have become albatrosses.